2017 has been a banner year for IP litigation in Canada. A
series of recent cases, from big trials to precedent-setting
appeals before the Supreme Court, have garnered international
attention from IP owners. With these decisions, changes in law,
and improved court procedures for assisting litigants in
getting to trial efficiently and in obtaining interlocutory
remedies more quickly, Canada is proving to be an attractive
jurisdiction for the protection and enforcement of intellectual
property rights.

Patents

In AstraZeneca v Apotex, the Supreme Court of
Canada abolished the controversial "promise of the patent"
doctrine, under which patentees had to prove that the claimed
invention was useful for any "promised" uses found in the
specification. This judge-made doctrine had been invoked to
invalidate numerous patents over the past decade, and even
resulted in a trade dispute between Eli Lilly and Canada under
NAFTA's investor-state arbitration regime. For years, patentees
have argued that the doctrine was arbitrary and inconsistent,
often resulting in invalidation of patents that were upheld
elsewhere. Finally, in June 2017, the Supreme Court unanimously
abolished the doctrine, holding that patentees need only
establish a "scintilla" of utility relating to the
subject-matter of the invention. The decision was a victory for
AstraZeneca (whose patent for its blockbuster gastrointestinal
drug Nexium was declared valid), but also for patentees, as the
Canadian standard of utility has now been brought closer to
other jurisdictions in respect of applicable utility
requirements for patentability.

Copyright

In the case of Nintendo v King, the Federal Court
of Canada had occasion to consider and apply the technological
protection measure (TPM) circumvention provisions in the
Copyright Act, which had yet to be substantively interpreted
since the provisions were enacted in 2012. The Court held that
the defendants' sale and installation of mod chips and game
copier devices which circumvented Nintendo's TPMs –
thereby enabling users to play unauthorized copies of video
games – constituted circumvention acts which were
prohibited under the Copyright Act. The Court awarded Nintendo
C$12.8 million in statutory damages, calculated based on the
number of works which were protected by the TPMs. The decision
sets a strong precedent, particularly for the protection of
distribution of copyrighted content over proprietary
platforms.

Trade marks

In a recent high-profile case, Diageo v Heaven
Hill, Diageo was successful in asserting its Captain
Morgan trade mark and trade dress over its bottled rum against
the defendant's Admiral Nelson's brand of rum products. The
Court found that the famous Captain Morgan character had
accrued significant goodwill in the marketplace, and that the
defendant's use of a similar looking character and imagery (an
admiral in front of a sailing ship) and a similarly shaped
bottle and label constituted passing off even though the
defendant's product prominently displayed the brand Admiral
Nelson's. The Court also found that the defendant's marketing
and sale of Admiral Nelson's brand of rum was an infringement
of the plaintiff's registered trade marks for the Captain
Morgan character and label, and that the defendant's actions
resulted in deprecation of goodwill on those trade marks. This
decision is a reminder of the benefits of trade mark
registrations in key character and label elements used on
product packaging, and is the latest example of Canadian courts
willing to protect trade dress and goodwill.

Remedies

These substantive legal developments are bolstered by a
recent string of decisions in which Canadian courts awarded
substantial and effective remedies.

In Dow v Nova, a record amount was awarded in a
patent infringement lawsuit involving polymers used in heavy
plastic bags, pallet wrapping and food packaging. Dow, the
successful plaintiff, elected to recover the defendant's
infringing profits as opposed to damages from lost sales, as is
often permitted in IP matters in Canada. In this case, the
Court also awarded an amount for infringing activity that took
place after the publication of the patent application but in
advance of the patent issuing, and an amount representing the
springboard profits enjoyed by the defendant following expiry
of the patent as a result of the defendant's infringing
activity prior to expiry. After a reference on quantification,
Dow was awarded C$645 million, including pre-judgment interest
which was calculated based on a profits-on-profits
approach.

The Canadian standard of utility has now been brought
closer to other jurisdictions in respect of applicable
utility requirements for patentability

Punitive damages are also available in IP litigation under
the right circumstances. In the aforementioned Nintendo v
King decision, the Court awarded $1 million in punitive
damages against the corporate defendant based on the evidence
of the scale of infringing activity and self-promotion as the
"#1" source for the circumvention devices, having regard to the
need to deter this type of large scale commercial unlawful
activity. In another recent case, Airbus Helicopters v Bell
Helicopter, a patent infringement case about helicopter
landing gears, the Federal Court awarded $1 million in punitive
damages based on "deliberate and outrageous" conduct of the
defendant in wilfully infringing the plaintiff's patent. The
punitive damage award was particularly notable because it
tripled the total damages award (the Court having found that
only C$500,000 should be awarded as compensatory damages based
on a hypothetical royalty between the parties).

Injunctive relief has also been an effective tool to stop
infringing activities based in Canada in a variety of recent
cases. For example, in Bell Canada v ITVBox.net et al,
the Court granted an interlocutory injunction against the
defendants, who were in the business of selling set-top boxes
pre-loaded with software designed to access illegal streams of
television programmes from the internet. The Court commented
that the emerging and new technology used to violate copyright
law was no barrier to obtaining an injunction against those who
participate in infringing activities. The decision may be a
signal that courts are ready to employ interlocutory relief
more readily than in the past.

The Supreme Court of Canada also recently weighed in on
global injunctions against search engines. In Google v
Equustek, a Canadian technology company, Equustek
Solutions, initially brought an action against a competitor,
Datalink, who allegedly sold re-labelled Equustek products and
appropriated its trade secrets. Datalink carried on business
over the internet, largely outside of Canada. Equustek sought
an injunction against Google to remove all search entries for
Datalink. Google voluntarily de-indexed a number of Datalink's
website entries, but only on its Canadian search portal on
Google.ca. Not content with this outcome, however, Equustek
sought an interlocutory injunction against Google to remove all
of Datalink's search results worldwide. The Supreme Court
upheld the global interlocutory injunction granted by the lower
courts, opining that because the "Internet has no borders", the
only effective remedy to attain the objective of the injunction
was to apply it globally, where Google operated.

The Google decision raises interesting questions of
jurisdiction and enforcement. Indeed, Google has brought a
further lawsuit before a US District Court seeking a
declaration that the Supreme Court of Canada decision cannot be
enforced in the United States.

Benefits of litigating in Canada

Litigating in Canada can be fast, effective and of strategic
importance to IP owners. In addition to the recent legal
developments described above, several features of the court
system make Canada an attractive jurisdiction to commence
proceedings.

1) Effective remedies. As noted above,
plaintiffs have access to a variety of flexible remedies
including damages, disgorgement of profits, punitive damages,
and permanent/interlocutory injunctive relief.

2) Costs to the victor. Canada is a
loser-pays jurisdiction, meaning that a successful party is
entitled to a percentage of the costs of lawyers' fees and full
reimbursement for all reasonable disbursements (such as expert
fees). In complex IP litigation, parties have received
substantial costs awards–for example, in the Dow v
Nova decision described above, the Court awarded $6.5
million to Dow for the costs of its successful patent
infringement action.

3) No forum shopping. In Canada, IP
litigation such as patent and trade mark infringement actions
are typically conducted in the Federal Court, which has
exclusive jurisdiction over validity of patents and trade mark
registrations. This generally means that parties will not spend
significant time on disputes over forum or jurisdictional
shopping issues (a matter that may be of great interest to US
litigants following the Supreme Court decision in TC
Heartland v Kraft Foods).

4) No file wrapper estoppel for patent
actions. Unlike the US, there is no doctrine of file wrapper
estoppel in Canada. Courts have consistently refused the use of
prosecution history and other extrinsic evidence to interpret
patent claims.

5) Quick and cost-effective procedures
available. Canadian courts have recognised the need for timely
adjudication of claims by civil litigants. Courts have been
encouraged to adopt rules and procedures to facilitate quick
resolution. In the Federal Court, where most IP litigation
occurs, there are numerous ways to achieve a speedy result. If
discovery of the defendant is not necessary, a plaintiff can
proceed by way of application using affidavit evidence, instead
of the usual viva voce testimony in the case of full
actions. Litigants may also seek to pursue summary trials where
the number of disputed issues are limited. Summary judgment is
also available where there is no genuine issue to be decided at
trial. Finally, the Federal Court has implemented proactive
case management guidelines for IP litigation resulting in
faster adjudication of interlocutory and procedural matters.
With full use of these tools, litigants can readily reach a
hearing on the merits within two years.

6) No jury trials. Also unlike the US, IP
litigation in the Federal Court does not feature jury trials.
Instead, complex issues of infringement, including in the
patent context, are decided by a trial judge alone.

7) More focused, less expensive, discovery.
Pursuant to the Federal Court Rules, only the attendance of a
single corporate representative for each party for oral
discovery is required (though inventors may also be deposed).
Unlike in the US, there is no requirement for the fact
deposition of numerous individuals during the discovery
process. As a result, discovery is relatively less expensive.
Recent case management guidelines from the Federal Court also
limit the amount of time that can be allotted for discovery,
thereby incentivising parties to focus on the important
issues.

The landscape for Canadian IP litigation has changed
dramatically and Canada has evolved into an attractive
jurisdiction for litigation with effective remedies for IP
enforcement. Global IP owners should consider the strategic
value and importance of litigation in Canada, especially given
its close economic relationship and strong trade position with
the US.

Steven B
Garland

Steven B Garland is a
partner in Smart & Biggar’s litigation
group with over 25 years of trial and appellate
experience in IP litigation of all types, including
issues relating to patent, trade mark, copyright,
industrial designs, trade secrets and competition law. He
has acted in many patent litigation matters that have
involved a wide variety of subjects, including chemical,
biochemical, pharmaceutical, biotechnological, telephony,
mechanical and computer/internet subject matter.

Steven has appeared as counsel in intellectual property
cases at both the Federal Court and Federal Court of
Appeal, the Ontario Superior Court and Court of Appeal,
and the Supreme Court of Canada. He also appears before
the Patent Appeal Board and the Trademarks Opposition
Board, and has been retained as a mediator in
intellectual property disputes.

Kevin P
Siu

Kevin P Siu is an
associate at the firm, practising in all areas of IP
litigation, including patent, copyright and trade mark
matters. He has worked with a variety of clients, from
start-ups to multinational corporations and across
industries, including the pharmaceutical, technology and
entertainment industries, as well as brand owners and
manufacturers of consumer goods.

Kevin’s experience with litigation and
enforcement matters, has included sending
cease-and-desist letters, investigation and collection of
evidence, preparation of pleadings and motions, working
with expert witnesses, and negotiations. In addition,
Kevin has experience in prosecution of patent, trademark,
and copyright matters, including in drafting new patent
applications and filing of trademark applications and
copyright registrations.

Smart &
Biggar is Canada's largest firm practising
exclusively in intellectual property and technology law,
and represents brands and innovators from around the
world. The firm's litigation team handles commercially
important and technically complex intellectual property
cases, and has significant experience in
multijurisdictional cases, and in the coordination of
litigation strategies worldwide. The following companies
highlighted in this article were represented by Smart
& Biggar: Dow Chemical Company,
AstraZeneca Canada, Nintendo of
America, Bell Canada, and Diageo
Canada.